PASCUAL V. CIR (TAX)

There is no evidence that petitioners entered into an agreement to contribute money, property, or industry to a common fund, and that they intended to divide the profits among themselves. Respondent commissioner and/or his representative just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof.

In Evangelista, there was a series of transactions where petitioners purchased 24 lots showing that the purpose was not limited to the conservation or preservation of the common funds or even the properties acquired by them. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present here.

The sharing of returns does not of itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. There must be a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property.

In the present case, there is clear evidence of co-ownership between the petitioners. There is no adequate basis to support the proposition that they thereby formed a unregistered partnership. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. They shared in the gross profits as co-owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the circumstances, they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent commissioner proposes.